Employment law review 2014: U.S.

Publication Date: 27 February 2014 | Author(s): Tiffany Downs, Scott Wagner, John Allgood, Joshua Sudbury, Chris Curran, Amy Littrell. Member Firm(s): FordHarrison Country: United States

In 2013, the U.S. Congress struggled with gridlock as a Republican-controlled House of Representatives blocked much of the pro-labor legislation proposed by the Democrat-controlled Senate. As a result, Congress had one of its least productive years in history with regard to enacting new laws. Accordingly, many of the changes impacting employers in 2013 were a result of court decisions, federal agency action, and state legislation rather than federal legislation.

Supreme Court Decisions

Treatment of Same-Sex Marriages: The Supreme Court’s decision in U.S. v. Windsor, finding a portion of the federal Defense of Marriage Act (DOMA) unconstitutional, had a far-reaching impact on employers. Section 3 of DOMA provided that only a marriage between a man and a woman would be recognized for the purposes of federal law. The Court’s decision striking this portion of DOMA impacted employers in a variety of areas, including employment related taxes and benefits, and federal immigration and leave laws.

“Supervisor” Narrowly Defined for Purposes of Federal Anti-Discrimination Law: In Vance v. Ball State University, the Supreme Court held that the term “supervisor” under Title VII, the primary U.S. law prohibiting employment discrimination, should be defined narrowly. The Court limited employers’ vicarious liability for workplace harassment by a “supervisor” to harassing conduct by persons with authority to take tangible employment actions (hire, fire, demote, promote, transfer, discipline) against the victim.

Heightened Standard for Proving Retaliation Claims: In Univ. of Tex. Southwestern Med. Ctr. v. Nassar, the Supreme Court heightened the burden of proof for individuals bringing retaliation claims under Title VII by holding that they must prove that the employer's desire to retaliate was the “but-for” cause of the employer’s adverse employment action. The Court found that the “motivating factor” standard commonly applied to Title VII status-based discrimination claims is not the proper standard for Title VII retaliation claims. Instead, the Court held that the party claiming retaliation must prove these claims through the higher but-for causation standard

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commonly found under traditional tort principles. The Court highlighted the dramatic increase in retaliation claims over the years and predicted that the new but-for standard will help foreclose frivolous retaliation claims.

Enforceability of Arbitration Agreements: In American Express Co. v. Italian Colors Rest., (a non-employment case) the Supreme Court found enforceable an arbitration agreement that included a class action waiver. The Court held that the Federal Arbitration Act (FAA) does not permit courts to invalidate such a contractual waiver, even when it is not financially feasible for an individual to pursue a particular federal statutory claim (given that the cost of doing so greatly exceeds the potential recovery). The Court strongly reaffirmed its prior support of arbitration agreements, i.e., private contracts to arbitrate disputes as an alternative to court action. The opinion essentially directed lower courts to enforce such agreements in most circumstances and to refrain from becoming involved in disputes covered by arbitration agreements absent strong reasons for doing so.

Federal Agency Action

Labor Board Activity: By the end of July 2013, for the first time in several years, the National Labor Relations Board (NLRB or Board) was fully staffed with all five members confirmed by the Senate. The fully constituted Board continued its aggressive pro-labor agenda, focusing on employers’ social media and confidentiality policies as well as class action waivers in arbitration agreements.

The Board issued a number of decisions finding that employers’ social media polices were overly broad and had a “chilling effect” on employees’ rights to engage in “concerted activities for collective bargaining or other mutual aid or protection” as provided by Section 7 of the National Labor Relations Act (NLRA). Generally, the Board found provisions to be overbroad if they contained vague or ambiguous language and did not contain limiting language informing employees that the restrictions were not intended to apply to Section 7 activity.

The Board also held that a class action waiver in a pre-employment arbitration agreement violated the NRLA; however a federal appeals court subsequently overruled this decision. The appeals court held that the Board’s decision ran afoul of the FAA’s policy favoring arbitration agreements. Other federal appeals courts have reached the same conclusion, refusing to follow the Board’s ruling.

In 2013, two federal appeals courts invalidated a rule promulgated by the NLRB that would have required employers to post a Notice of Employee

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Rights under the National Labor Relations Act. The rule provided that an employer's failure to post the Notice may: (1) be considered an unfair labor practice (ULP); (2) toll the statute of limitations for filing a ULP charge; and (3) be used as evidence of anti-union animus in proceedings before the Board. In early 2014, the Board announced that it would not seek Supreme Court review of the decisions invalidating the rule. Thus, while the Notice remains available on the Board’s web site and may be voluntarily disseminated, the Board no longer requires its posting.

Family and Medical Leave Act (FMLA) Regulations: In February 2013, the U.S. Department of Labor (DOL) issued a final rule implementing the changes to the FMLA made by the 2010 National Defense Authorization Act (NDAA) and the Airline Flight Crew Technical Corrections Act (AFCTCA). The AFCTCA amended the FMLA to incorporate a special eligibility provision for airline flight crewmembers and flight attendants. The 2010 NDAA, among other things, amended the FMLA's military caregiver leave provisions and expanded the qualifying exigency provision.

Implementation of Certain Provisions of the Affordable Care Act (ACA) Delayed: In 2013, certain provisions of the ACA (the comprehensive health care reform law enacted in 2010) were delayed. In July 2013, the Obama Administration announced that implementation of the penalties under the ACA’s employer mandate (also known as the “pay or play” penalties) would be delayed until 2015. Subsequently the administration announced that, for small employers (generally, those with fewer than 50 employees), full implementation of the Small Business Health Insurance Exchanges (SHOP), a featured provision of the state- or federally-run health exchanges, would also be delayed until 2015. Small businesses should be able to participate in a limited operation of SHOP in 2014, but generally will not have access to a variety of health insurance options until 2015. Other provisions of the ACA were not delayed, including plan design requirements regarding the type of coverage that must be provided by employers who provide health care coverage (such as women's preventive care and the elimination of pre-existing condition exclusions); reporting the cost of employer-provided health care coverage on employees’ tax forms; and distributing certain notices.

OFCCP Issues Veterans and Rehabilitation Act Regulations: In August 2013, the Office of Federal Contract Compliance Programs (OFCCP) announced final rules revising its Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) and Rehabilitation Act regulations. These regulations relate to the employment of veterans and individuals with disabilities by federal contractors and subcontractors.

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Looking Ahead to 2014

2014 may be another year of low productivity for Congress, since Republicans continue to control the House, while the Senate remains controlled by Democrats. Nevertheless, there are a number of bills currently pending in Congress that could impact employers. Additionally, the Supreme Court is considering certain issues that will impact employers, and federal agencies undoubtedly will continue to be active.

Health Care Reform: Implementation of the ACA will continue in 2014. On February 10, 2014, the U.S. Treasury Department issued regulations providing that employers with at least 50 but fewer than 100 employees will not be required to comply with the employer shared responsibility provision of the ACA until January 1, 2016. Employers with at least 100 employees will be required to comply with this provision beginning January 1, 2015. The shared responsibility provision, also known as the employer mandate, requires employers with 50 or more full-time employees to offer health insurance coverage to their full-time employees or face a penalty. Certain other provisions of the ACA take effect in 2014, and we expect more regulations and guidance to be issued.

Labor Board Issues: In January 2014, the U.S. Supreme Court heard oral argument in NLRB v. Noel Canning on the issue of whether President Obama’s recess appointments of three members to the NLRB in 2012 were unconstitutional. If the Court finds that the appointments were unconstitutional, it will mean that the Board acted without a quorum and hundreds of Board decisions issued in 2012 may be found to be invalid.

Regardless of the outcome of the Noel Canning case, the Board is now fully constituted and has already demonstrated that it will continue its aggressive pro-union agenda. In February 2014, the Board announced that it is issuing proposed amendments to its rules governing representation case procedures. The proposed rules are substantially identical to rules first proposed in 2011. While the proposed election rules contain many drawbacks for employers, one of the most significant concerns is the newfound swiftness of the election process. The proposed rules will speed up the election process in no small part by curtailing the employers’ rights to challenge the units proposed by the union. Legislation was introduced in 2013 that would set bargaining unit standards for the Board to apply in representation cases. If the Board implements the rules as proposed, this legislation likely will be reintroduced in 2014.

The DOL has announced that it will issue a final rule narrowing the advice exemption under the Labor-Management Reporting and Disclosure Act (LMRDA). The LMRDA requires employers and legal consultants to

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disclose any arrangement to persuade employees, either directly or indirectly, regarding the right to organize or bargain collectively. There is an exception to the disclosure requirement providing that an employer or consultant is not required to file a report disclosing the consultant’s services if the consultant just provided advice to the employer. The DOL believes this exception has been too broadly construed and proposes narrowing the definition of advice for the purposes of the exception. Narrowing the definition of advice will significantly increase the types of agreements that are subject to disclosure.

Wage and Hour Issues: Legislation currently is pending in the Senate that would increase the federal minimum wage rate. President Obama has already issued an Executive Order increasing the minimum wage rate for certain federal contractors, which takes effect in 2015. In his State of the Union address, the President announced that he will use executive orders to achieve his policy goals where Congress fails to act. Employers can also expect the DOL to continue to investigate misclassification of employees as independent contractors, misuse of the Fair Labor Standards Act’s tip credit provision, and other FLSA violations, such as off-the-clock work and misclassification of non-exempt employees as exempt. Legislation that would impose penalties on employers who intentionally misclassify employees as non-employees was introduced in late 2013 and remains pending.

Discrimination Based on Sexual Orientation and Gender Identity: At the end of 2013, the Senate passed the Employment Nondiscrimination Act (ENDA), which would prohibit discrimination based on sexual orientation and gender identity. The House currently is considering the bill, which has been considered a number of times over the years and has never been enacted.

Immigration: Sweeping immigration reform legislation was proposed in 2013 but was not enacted. In light of comments made by Republican leaders, it appears unlikely that Congress will pass broad immigration reform in 2014. It is possible, however, that some form of immigration legislation will be enacted, albeit more limited than what the Senate has proposed.

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Originally posted on the Ius Laboris Knowledge Base: www.globalhrlaw.com

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